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ALERT: New Proposed Taxes

Posted on April 27, 2021

Late last week, legislative Democrats unveiled their latest tax and spend plan which calls for a 5.5 percent increase in spending and $1.9 billion in new taxes over the next two years; $3.2 billion over the next three years.
Even as a historic package of $6.2 billion in federal COVID-19 recovery funds flow into Connecticut through the American Rescue Plan Act, the Democrat-dominated Appropriations and Finance, Revenue & Bonding Committees have countered the governor’s relatively conservative budget stance to make Connecticut less affordable. Despite residents’ struggling to recover from the pandemic, pretty much everything we don’t grow in our own backyards will become more expensive.  
My colleagues and I are vehemently opposed to putting more financial burdens on working and middle-class families. We believe the better way to invest in our state is to leverage a combination of state revenues, federal recovery funds and surplus rainy-day funds.
Below is a summary of what’s in the plan.
A Two-Year Budget with $1.9 Billion New Taxes + $1.3 Billion More Taxes Deferred to Year Three = $3.2 Billion?
The Democrats’ proposal includes regressive taxes that will most hurt those already struggling, as well as taxes that will drive away job creators which will force the working and middle class to shoulder even more of that burden in the future. In addition, the state’s biennial (2-year) budget includes tax increases for the next budget cycle. I don’t think this is a precedent we want to set. Do you?
The Democrats’ plan:
  • A mileage tax on trucks. This will lead to higher grocery bills and more expensive home heating oil as the truck tax will impact prices of everything trucks transport through our state (estimated revenue: $45 million in FY23 and $90 million in FY 24)
  • Cancels property tax relief for the middle class (a $53 million tax increase annually in FY 22 and FY 23)
  • Cancels tax relief for job creators by making permanent the 10 percent corporate tax surcharge ($80 million in FY 22, and $50 million annually in FY 23 and FY 24)
  • Establishes a new “consumption tax” described by Democrats as a way to increase the sales tax rate on higher income residents (estimated revenue: $500 million annually)
  • Imposes a state convenience fee for credit/debit card use (estimated revenue: $5 million annually in FY 23 and FY 24)
  • New taxes related to gaming (estimated revenue: $30.5 million in FY 22, $43.1 million in FY 23, $58.8 million in FY 24)
  • New social media advertising tax which will most hurt local mom-and-pop shops and non-profits (estimated revenue: $150 million in FY 22, $162 million in FY 23, $175 million in FY 24)
  • New 2 percent surcharge on capital gains (estimated revenue: $262 million annually)
  • New taxes related to cannabis legalization (estimated revenue: $11.1 million in FY 22, 39.5 million in FY 23, 73.1 million in FY 24)
Circumvents the Spending Cap
The spending contained in the Democrats’ proposal far exceeds what is allowed under CT’s spending cap.
To avoid the cap, Democrats are moving major spending and revenue items to newly created offline accounts to skirt taxpayer protections and avoid transparency. Their plan shifts FY 21 tax revenue into FY 22 and FY 23 AND creates a massive OFF-budget account called the Equitable Investment Fund (EIF) which removes over $1B from the ledger.
This flies in the face of the good fiscal policies that have enabled our state to grow its rainy-day fund to historic levels and achieve a triple-A bond rating. This proposal would undo that progress and sets us up for unsustainable spending.
Future Funding Cliff
The Democrats’ proposal contains at least $2 billion in one-time revenues that will result in an equal sized hole in the next budget. Translation: Guaranteed deficits as recovery funds dry-up, followed by greater out-year tax increases.
We need to make sure the state budget helps move our state beyond the pandemic and that federal funds are used for transformative policies that will set a new course for our state and its residents. We must not add new costs that our residents cannot afford over the long term. We must not perpetuate a cycle of needing future federal assistance.
Governor Says No
Even the governor has voiced opposition to the tax plan before a single vote was cast, expressing concern that it could risk the state’s recent financial successes as it emerges economically from the pandemic.
I will continue to be your voice in state government, while advocating for common sense proposals that help, not hurt residents and businesses in this state.